Should you invest in Douugh when the neobank pioneer lists on the ASX?

Douugh is soon to be the first neobank to publicly list on the ASX. Should you invest now or wait and see?

| More on:
dollar sign on hand

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The long-awaited initial public offering (IPO) of shares for a neobank in Australian equity markets is expected to occur as early as next week.

According to a report in the Australian Financial Review (AFR), fintech company Douugh launched a pre-listing capital raise of $750,000 via the online platform Equitise late last week.

The AFR reported that the pre-IPO funding was secured within an hour of being shared, making it the quickest crowdfunding effort seen by the Equitise platform to date. This sensational backing by investors suggests a heap of excitement around the neobank and its unique features.

What is a neobank?

For those unfamiliar, neobanks perform almost identical functions to traditional bricks and mortar banks like the big four in Australia, but do so exclusively online without physical branches.

For some people, the inability to go into your local branch and do your banking is a deal-breaker. Neobank proponents believe the inevitable cost-reduction of being purely online represents a slimmer and more profitable business model.

Many would have heard of 'Up Bank', which is owned by Bendigo and Adelaide Bank Ltd (ASX: BEN). Up Bank was the first neobank to hit Australia, and provided snazzy features like a bright red debit card and a decent savings interest rate of 1.5%.

These innovative features draw in millennials and younger customers who find the benefits of a local bank branch negligible and would rather choose minimal fees and maximum savings.

How is Douugh different?

According to its webpage on Equitise, Douugh is taking "a proprietary artificial intelligence (AI) first approach to disrupting the business model of banking". This to be achieved by helping customers spend wisely, pay off debt, save more and build wealth through a smart bank account and debit card.

It is believed that Douugh and a washed-up telecommunications company already listed, Ziptel Ltd (ASX: ZIP), will in effect merge in a complex deal known as a reverse takeover. In layman's terms, the neobank will start as Ziptel but relist almost immediately as Douugh Ltd under the ticker ASX: DOU .

Douugh is predominantly a US-focused company. It has launched its mobile app to the US app store and partnered with American institution Choice Bank. Notably, Douugh has formed a global strategic partnership with payments powerhouse Mastercard, an alliance which is potentially adding to the hype of its pre-IPO popularity among investors.

Should you invest

It is widely known that the 'GOAT' investor Warren Buffet has never been much of a fan of IPOs. But at the end of the day, whether you should invest boils down to if you think neobanks are the future.

On one hand, neobanks attract minimal fees for customers, provide innovative budgeting tools and lower overheads, and often facilitate higher interest rates to encourage savings.

Overall, part of me thinks neobanks are the future – that they will incrementally chip away at the market share of the big 4 banks due to their popularity among millennials. For now though, the Douugh IPO is a bit too spicy for my risk appetite so I'm staying on the sidelines a little longer.

Keep an eye on Douugh when it launches in the coming days. If it performs well, I wouldn't be shocked to see a few more neobanks listing on the ASX in the future.

Motley Fool contributor Toby Thomas has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A smiling businessman in the city looks at his phone and punches the air in celebration of good news.
Broker Notes

These ASX 200 shares could rise 50% to 60%

Brokers believe these shares could deliver big returns for investors.

Read more »

A girl is handed an oversized ice cream cone with lots of different flavours.
Best Shares

8 ASX All Ords shares that tripled in value in FY25

Just 8 out of the 500 companies making up the ASX All Ords achieved share price growth of 200% or…

Read more »

Broker written in white with a man drawing a yellow underline.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

Woman with a scared look has hands on her face.
Broker Notes

Bapcor shares fell more than 30% yesterday. Should investors buy in the dip?

Is this a value opportunity?

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Broker Notes

Broker raises price targets on 2 ASX 200 shares to buy

Ord Minnett has just upped its 12-month share price targets on 2 buy-rated ASX 200 stocks.

Read more »

Man with rocket wings which have flames coming out of them.
Share Gainers

Guess which ASX All Ords stock just rocketed 34% on strong earnings growth

Investors just sent this ASX All Ords stock surging 34%. Here’s what’s happening.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why DroneShield, Gentrack, Metals X, and Northern Star shares are tumbling today

These shares are ending the week in the red. But why?

Read more »

A businessman looking at his digital tablet or strategy planning in hotel conference lobby. He is happy at achieving financial goals.
Share Gainers

Why Dimerix, Newmont, Regal Partners, and Titomic shares are storming higher

These shares are having a good finish to the week. Let's see why.

Read more »